Apple Earnings: the Highlights

If you missed Apple 's fiscal third-quarter earnings report and its call with Wall Street’s analysts, here’s a recap: The financials were mostly in line with forecasts from Apple and Wall Street, save for a big number on iPhone unit sales. More on that below. If you want the blow-by-blow, go here.

Here are the highlights:

Net Income: $6.9 billion, or $7.47 a share, compared with $8.8 billion, or $9.32. The gross profit margin was 36.9%, compared to expectations of 36.7%.

Revenue: $35.3 billion, compared with $35 billion in the same period in 2012. Apple projected revenue for the fiscal fourth period of $34 billion to $37 billion. Analysts had been projecting the top end at $37 billion.

iPhone Unit Sales: 31.2 million iPhones, compared with analysts’ expectations of 26.5 million. Apple sold 37.4 million iPhones in the second quarter ended in March, and 26 million in the year-earlier period.

This was arguably the most interesting point of the report. Verizon set off speculation last week that the numbers were going to be surprisingly strong when it said 51% of the smartphones it sold in the quarter were iPhones. And, indeed, that happened.

But here’s the rub: Apple doesn’t break out sales for individual models, so it isn’t written in clear ink whether the pricier iPhone 5 or the older iPhone 4 models were the driver. (Verizon didn’t specify in its report.)

Apple hammered home the point that the iPhone 5 was the most popular smartphone. But when pressed on the investor call, Apple did say the that currency headwinds and sales of the iPhone 4 and 4S — the product mix — brought down the average selling price of the iPhone by some 4%. Doing the math, the average selling price of an iPhone was about $581. Discounting of the iPhone 5? To some extent, but this looks more like strong sales of the lower model. For its part, Apple said the iPhone 4 models were doing quite well in emerging markets, where more affordable options are desired.

Analysts pressed again, asking if consumers have hit a peak in terms of buying super high-end smartphones. CEO Tim Cook flat out said no. To be fair, Apple hasn’t released a new iPhone in several quarters. Sales of the next iPhone — the 5S? — should give a better answer to that question. The phone after that, which may have a more radical design, could give an even clearer indication.

iPad Unit Sales: 14.6 million, compared analysts’ expectations of about 18 million. Apple sold 19.5 million iPads in the second quarter, and 17 million in the year-earlier period. Apple attributed this downbeat number to a tough comparison to the year earlier, when the third-generation iPad went on sale. That’s a fair point. This is the perfect time to segue to …

… The Best Moment of the Investor Call: When asked about iPad sales relative to competitors, Cook nonchalantly said he “didn’t know” how others were doing. But then he lobbed a zinger. Some recent data he had seen said 84% of all Web-based traffic on a tablet happened on an iPad, which he called “incredible.” Given that number, he said, if there are a lot of others tablets flying off shelves, he doesn’t know what they are being used for.

New Products: Nada. Apple was unyielding, even after being lured into answering a question about premium products, or new product categories–like, ahem, a television or watch — that can move the needle. Apple executives are way too comfortable in their armor to let anything slip like that unless orchestrated. When asked if any new products were shipping this quarter, Apple abruptly declined to comment.

Trade-Ins: How about a new strategy, like trading in older model iPhone? Apple initially stiff-armed, saying the analyst was hearing rumors. But when asked if they were opposed to such a strategy, Cook said “no.”

China: When Apple rattled off the list of countries where iPhones are selling like mad — Poland, Philippines, India — an analyst countered simply: China was notably absent from that list. Apple admitted China was weaker (the chart below shows just how much; click for a larger view), but said a lot of the drag was Hong Kong, not the mainland. The chart below is also interesting because it shows that, compared to the second period ended in March, the only growth was in the Americas.